What the Coverage Gap Is and When It Hits

The coverage gap — also called the "donut hole" — is a range of drug costs where Medicare Part D stops paying and you pay the full price yourself. It starts after you and your plan have spent a combined $5,850 on covered drugs in 2024 (this dollar amount changes each year). Once you hit that threshold, you pay 100 percent of the cost of your medications until your out-of-pocket spending reaches $7,050. After that, catastrophic coverage kicks in and Medicare pays most of the cost again.

Not everyone enters the gap. If your monthly drug costs are low, you may never spend enough to trigger it. But if you take multiple medications or expensive drugs, the gap can appear suddenly — often mid-year — and create a sharp jump in what you owe at the pharmacy.

The gap exists because of how Part D is structured: the plan pays a share of your costs up to the initial threshold, then you become responsible for the full amount until you reach the catastrophic level. This was part of the original Medicare Part D design, though recent law changes have begun to narrow it.

Key Takeaways

  • The coverage gap begins after combined spending (your costs plus plan payments) reaches $5,850 in 2024, and you pay 100 percent of drug costs until your out-of-pocket total hits $7,050.
  • You enter the gap only if your drug costs are high enough; many people with lower medication expenses never reach it.
  • Starting in 2024, Medicare covers 25 percent of brand-name drug costs in the gap, and this percentage increases each year through 2029.
  • Switching to a generic drug or a different plan during open enrollment can reduce or eliminate the gap for your situation.
  • Once you reach catastrophic coverage, Medicare pays 80 to 95 percent of costs for the rest of the year.

How the Gap Works Step by Step

Understanding the gap requires tracking three separate spending amounts: what you pay out of pocket, what your plan pays, and the combined total of both.

In the initial coverage phase, your plan covers a percentage of your drug costs (usually 75 to 80 percent for generic drugs, less for brand-name drugs) and you pay a copay or coinsurance. Both amounts count toward the $5,850 combined threshold. Once that threshold is reached, you enter the gap.

In the coverage gap, you now pay a larger share. As of 2024, you pay 25 percent of the cost of brand-name drugs and 25 percent of generic drugs (this was expanded by recent legislation). Your plan does not pay anything during this phase, but the amount you pay still counts toward your out-of-pocket total. You stay in the gap until your out-of-pocket spending alone reaches $7,050.

Once you hit $7,050 in out-of-pocket costs, you enter catastrophic coverage. Medicare then pays 80 to 95 percent of your drug costs for the rest of the calendar year, and you pay only a small copay or coinsurance.

Recent Changes That Narrow the Gap

The Inflation Reduction Act, which took effect in 2024, began closing the coverage gap. Starting this year, Medicare covers 25 percent of brand-name drug costs while you are in the gap — meaning you no longer pay the full price. This percentage will increase gradually: to 30 percent in 2025, 35 percent in 2026, and so on, until the gap is largely eliminated by 2029.

Additionally, the law capped insulin copays at $35 per month for Medicare beneficiaries, even in the gap. If you take insulin, this change may mean the gap has far less impact on your budget than it would have in previous years.

These changes do not happen automatically — your plan must comply with the new rules. When you review your plan during open enrollment, check whether it reflects these improvements. Most major plans do, but it is worth confirming.

Which Plans Have Smaller Gaps

Not all Part D plans have the same gap structure. Some plans offer gap coverage — they continue to pay a share of your costs even after you enter the gap. These plans typically charge higher premiums, but they can save money if you know you will hit the gap.

Plans vary in how much they cover in the gap. Some cover 50 percent of brand-name drugs, others cover 75 percent. A few cover generics more generously than brand-name drugs. The trade-off is always the same: higher monthly premiums in exchange for lower costs if you reach the gap.

To find which plans offer gap coverage in your area, use the Medicare Plan Finder tool on Medicare.gov. You can enter your medications and see which plans cover them in the gap and what your total costs would be under each plan. This is the most accurate way to compare, because the gap structure is one of several factors that affect your yearly cost.

Strategies to Avoid or Reduce the Gap

If you know you are likely to hit the gap, several moves can reduce its impact. The first is to switch to generic drugs if your doctor agrees. Generics cost less, so you reach the $5,850 threshold more slowly and may spend less time in the gap. Your pharmacist can tell you whether a generic version of your medication exists.

The second is to change your Part D plan during open enrollment (October 15 to December 7 each year). A plan with gap coverage or a lower deductible might cost less overall, even with a higher premium. Run the numbers using Medicare Plan Finder before you decide.

The third is to use patient information programs offered by drug manufacturers. These programs provide free or low-cost medications to people who meet income requirements, and they can help you avoid the gap entirely. Your doctor's office or pharmacist can help you find programs for your specific drugs.

A fourth option is to spread out refills strategically if your medications allow it. If you are close to the gap threshold, delaying a refill by a few weeks might push it into the next calendar year. This only works if your health permits it — never skip doses on your doctor's information to save money.

What Happens After You Leave the Gap

Once your out-of-pocket costs reach $7,050, you move into catastrophic coverage for the remainder of the calendar year. At this point, Medicare pays the majority of your drug costs. You pay only a small copay (usually $3.95 to $9.85 for generic drugs, $9.85 to $24.70 for brand-name drugs, depending on the plan) or a small coinsurance percentage.

This catastrophic phase lasts until December 31. On January 1, the counters reset and you start over in the initial coverage phase. If you take expensive medications year-round, you may find yourself cycling through the gap every year.

Frequently Asked Questions

Does the coverage gap affect all medications?

The gap applies only to covered drugs under your Part D plan. Some drugs are excluded from coverage entirely (certain over-the-counter medications, for example), and those do not count toward the gap threshold. Your plan's formulary lists which drugs are covered. Drugs on the formulary are subject to the gap; drugs not on it are your responsibility at any spending level.

Can I change my Part D plan if I am already in the gap?

No. You can change plans only during the annual open enrollment period (October 15 to December 7) or if you experience a may have access to life event (such as moving to a new state or losing employer coverage). If you are already in the gap, you are locked into your current plan until the next open enrollment.

What if my plan does not show the gap on my bill?

Your plan should clearly label when you enter the gap on your explanation of benefits or pharmacy receipt. If it does not, contact your plan directly and ask them to clarify your spending status. You can also check your status on Medicare.gov by logging into your account.

Does the gap affect Medicare Advantage plans?

Medicare Advantage plans (Part C) include drug coverage, but they do not have the same gap structure as standalone Part D plans. Instead, they have their own out-of-pocket maximums and cost-sharing rules. If you are in a Medicare Advantage plan, review your plan documents to understand how your drug costs work.

Will the gap disappear completely?

The gap will not disappear entirely, but it will shrink significantly. By 2029, Medicare will cover 80 percent of brand-name drug costs in the gap, and you will pay only 20 percent. This is a major improvement from the current structure, though some gap will remain.